How much cover should you have?
Is your professional indemnity policy limit adequate?
Falling PII premiums have saved money for professionals in recent years but while reductions are welcome, now may be the time to consider investing some of the savings in adding extra cover at the top of your policy to provide greater catastrophe protection for the future.
The ‘claims made’ nature of Professional Indemnity means that the policy limit in force today applies to any new claim that you learn of in today’s post, until the dispute is finally settled. If cover of £2m, £3m or £5m is felt to be enough in terms of today’s compensation climate, will it still be enough if a claim should not finally settle until 2017?
'Future proof' your limit of indemnity
The longest passage of time between a potential claim being first notified and its eventual settlement that we have experienced is 11 years. When the claim first reared its head the firm had cover of £1m which was felt to be more than sufficient. When proceedings were finally issued almost a decade later, the amount claimed was £1.75m.
What else should you consider?
When assessing the level of cover you need think about:-
- The provisions of any relevant professional association or regulator,
- Your client's expectations, whether set by specific contractual agreement or otherwise,
- The financial fallout from the worst possible mistake you could make in delivering your services, at the most difficult time when working for your biggest client,
- Statutory interest can add significantly to a claim award of compensation,
- You will be unable to control the claimants choice of advisers and if you lose their costs will be added to the award made in their favour,
- Claimants’ legal costs are covered within the limit of indemnity you choose.
Your own defence costs and expenses should be covered in addition to the limit you select so you should not need to take this factor into account but there are still limitations that can be detrimental.
Pay attention to the regulations of professional bodies but taking the minimum cover to be compliant may still leave you under-protected. The cost of increasing your indemnity limit is surprisingly small at the moment with strong competition between Insurers.
E Mail pi@ntegrity.co.uk